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The merchant cash advance industry, which buys future credit-card transactions from merchants, expects 2009 to hold even more growth as merchants turn to non-bank resources for money. Merchants often use the money to fund capital projects as a boost during low cash-flow periods and for other reasons. The North American Merchant Advance Association estimates that in 2008 the industry will fund about $1 billion in advances. The group also says the sector is growing at about 25% to 40% annually yet only about 5% to 7% of merchants use merchant cash advances. "Even really great business owners with great FICO scores are finding that they're getting letters from the bank saying your home equity line has been pulled or credit card level is reduced," says Diane Naczi, senior vice president of marketing at Kennesaw, Ga.-based AdvanceMe Inc. Not surprisingly, cash-advance firms expect the tight credit market and uncertain economy not only to linger, but also to continue to play to their advantage well into 2009. "It's an unprecedented opportunity that I don't think we'll see again in our lifetime," says Stephen McDermott, chairman and CEO of Hauppauge, N.Y.-based Professional Merchant Advance Capital (ProMAC), which targets merchants in the professional services, business-to-business and health-care sectors. "The business owners we're seeing right now, if you looked at them six months ago, could get traditional financing through a bank." Some believe that cash will remain king well through the fourth quarter of this year, making it more difficult for merchants to get conventional bank financing. "We're going to see in the banking side a return to stricter underwriting standards," says Michael Berman, chief operating officer of Outside Ventures LLC, the New York-based parent company of Tribul Merchant Services. "All of the predictions suggest that Q4 retail sales will not be robust. They're going to be somewhat conservative" and monitor how the fourth quarter performs.
